It is understood that he ran Trabia, near Palermo in Sicily, for the Mafia.

Scotland Yard confirmed that the 64-year-old was arrested at 7pm yesterday by the force's extradition unit.

A spokesman said: "Officers from the Metropolitan Police Service extradition unit arrested Domenico Rancadore on a European arrest warrant alleging that he has an outstanding sentence of seven years’ imprisonment to serve for participation in Mafia association between December 17 1987 and April 13 1995 in Palermo, Italy.

"He was taken into police custody and is scheduled to appear at Westminster Magistrates' Court today."

A statement from the Italian Interior Ministry said: "Accused of crimes of mafia-style association, extortion and other serious offences and sought since 1994, multiple previous offender Rancadore Domenico, 64, from Palermo, was arrested yesterday in London by British police.

"The operation was made possible thanks to the investigative data provided by the Central Operations Service and the Mobile Squad, allowing British investigators, with the help of the service for International Police Cooperation, to locate where the fugitive was hiding.

"Rancadore ran a travel agency in the British capital and led a comfortable life. Several cooperating witnesses have referred to him as a leading member of the Palermo Mafia 'family', with a senior managerial role in the Caccamo 'commandment'. In particular, in the 1990s, he played the role of chief of the Cosa Nostra in Trabia, Palermo.

"The operation is the result of the important relationship of international police cooperation ensured through Interpol."

Rancadore was arrested at a residential address in Manor Waye, Uxbridge, under a European Arrest Warrant issued in January 2012.

Joan Hills, 76, who lives in Manor Waye, said she knew Rancadore as Marc Skinner and his family had lived in the road for several years.

"I know him very well and he's one of the best neighbours you could ever have," she said.

"They have been here for years. I've seen the children grow up with my children. I don't know the ins and outs of this, but they are the nicest people that you could wish to meet."

She said that Rancadore had two children and his wife Anne ran a travel agency.